UK inflation hits new 40-year high of 9.4% in June as cost of living crisis worsens – business live

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Goods inflation
Goods inflation Photograph: ONS

The Liberal Democrat Treasury spokesperson Sarah Olney said families and pensioners were being hammered by relentless price hikes while the government stood by.

Britain now has a Zombie government in the middle of a cost of living crisis. The country can’t wait any longer for this Conservative party to play out their horror show leadership contest.

VAT must be slashed right away to cut prices at the shopping tills and fuel pumps.

Instead, people are suffering every day from Rishi Sunak’s tax hikes and are left without any functioning government when next month’s energy price rises are announced. Britain deserves better than this.

Prices charged in restaurants and hotels rose by 8.6% in the year to June, up from 7.6% in May and the highest since August 2021. Clothing and footwear prices rose at a slower rate of 6.1%, down from 6.9% in May, but there was little evidence of the discounting that normally happens in the summer sales. The ONS said:

Prices normally fall at this time of year as the summer sales season begins, but there was little movement in 2022 and, in 2021, prices were still rising following the end of the coronavirus lockdown.

Clothing and footwear
Clothing and footwear Photograph: ONS

Food and non-alcoholic drinks rose by 9.8% in the year to June, the highest rate since March 2009. Milk, cheese and eggs as well as vegetables, meat and other food products such as ready meals became more expensive.

Helen Dickinson, chief executive of the British Retail Consortium, said:

Inflation continues to rise, heavily driven by rising production costs. Food prices have been sharply hit by soaring global commodity prices and the rising costs of animal feed and fertilizer, both exacerbated by the war in Ukraine. Across the board, non-food products are being impacted by haulage and shipping costs, whilst surging energy prices are making stores increasingly expensive to run.

In the face of rising pressures in supply chains and operations, retailers are doing all they can to absorb as much of these costs as possible and look for efficiencies in their businesses. Retailers are expanding their value ranges to offer the widest variety of goods to those most in need, providing discounts to vulnerable groups, and raising staff pay. Until inflation is brought to heel however, it will be a difficult road ahead for households and businesses in the UK.

Inflation: CPI 9.4% up from 9.1%, highest since Feb 1982. Last time it rose through this level July 1979. Then it stayed in double figures for 2yrs 8months.
RPI 11.8% up from 11.7% highest since Feb 1982
CPIH which no-one uses 8.2% up from 7.9%

— Paul Lewis (@paullewismoney) July 20, 2022

Rising prices for motor fuels and food made the biggest upward contributions to the inflation rate as petrol and diesel prices hit new records, the ONS said. Transport costs overall were 15.2% higher in June.

Petrol and diesel prices went up 42.3%, the highest rate since at least 1989. Average petrol prices were 184p per litre in June, the highest on record, compared with 129.7p a litre a year earlier. The average price of diesel was also the highest recorded, at 192.4p per litre.

UK inflation hits new 40-year high of 9.4% in June

UK inflation hit a new peak of 9.4% in June, driven by higher fuel and food prices, according to figures from the Office for National Statistics.

In case you were wondering why Britain’s roads melt and its rails buckle in the heat, here’s a handy explainer.

But as the temperate has dropped by up to 10C in some areas today, heavy showers and thunderstorm predicted in parts of northern England and southern Scotland could bring new disruption.

Hewson added:

It is true that no one could have foreseen the Russian invasion of Ukraine and the effects that it has had on the global economy; the central bank’s procrastination pre-dated that when it was clear inflation was starting to become embedded. Now that we’re seeing it move into grocery prices after the latest Kantar data showed grocery prices rise by 9.9% it is becoming ever clearer that inflation is becoming much more persistent.

This is expected to manifest itself further in today’s June CPI numbers which are expected to rise from 9.1% to a new record of 9.3%, although core prices could slip back to 5.8%.

Almost half of the increase in headline CPI [consumer price index] is reflected in higher gas, electricity, and petrol prices, which accounted for over 4% of the increase in May. This is expected to continue in June, and while expectations are for a rise to 9.3%, there is a risk we could go even higher if last week’s big spikes in the US are any guide.

The picture isn’t any better on the old RPI [retail price index] measure which rose to 11.7%, while PPI [producer pice index] input prices surged to a new record of 22.1% in May, and are expected to rise further to 23%.

Introduction: UK inflation to hit new peak as fuel, food prices rise

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

As we are sweltering in the heatwave, and the barometer hit a new record of 40.2 degrees at Heathrow airport yesterday, inflation is also heating up further.

The latest official figures, out at 7am, are expected to show a rise in the headline annual rate to 9.3% in June, another record, from 9.1% in May, which was the highest since 1982. The Bank of England expects inflation to reach 11% this autumn.

Investec economist Ellie Henderson said the driving factors behind the latest pick-up in inflation are fuel costs and airline prices, as well as continued high food inflation, exacerbated by the weaker pound.

A driving factor behind this is rising fuel prices. More timely data has pointed to an over 9% gain in fuels & lubricant prices in June. We expect airline prices to also show hefty price gains in June due to higher fuel costs, with prices already under upward pressure owing to a burst in demand meeting labour shortages. Finally, given the continued conflict in Ukraine, high food price inflation is likely to have remained in June, exacerbated by a weaker sterling given the UK’s dependence on imported food products. 

Looking further ahead, the energy outlook is one of, if not the, most substantial factor determining how persistent headline inflation may be. The Ofgem energy price cap will be next adjusted in October, where our utility analysts have forecasted an eye-watering 67% increase to the cap, to £3,285.

Aside from the energy outlook, recent political events add an extra layer of uncertainty as to how long ‘core’ inflation, excluding food and energy, may persist for. Many of the frontrunners to replace current PM Boris Johnson, former Chancellor Rishi Sunak aside, have promised sweeping tax cuts as part of their leadership campaign. Such tax cuts may help stimulate the economy, but also risk creating more entrenched underlying inflation.

Inflation has already wiped out wage growth. UK workers suffered a 2.8% real pay cut between March and May (adjusted for inflation and excluding bonuses) – the biggest fall since records began in 2001, according to the Office for National Statistics, as we learned yesterday.

So far, the wage-price spiral feared by central bankers has failed to materialise – instead, there is an intensifying squeeze on living standards as the gap between pay and the cost of living widens.

But Bank of England governor Andrew Bailey said yesterday that a half-point increase in interest rates was “on the table” for next month, as the central bank considers toughening its anti-inflation stance.

Michael Hewson, chief market analyst at CMC Markets UK, said:

The August meeting will also be used for the publication of the central bank’s plans to reduce the size of its balance sheet.

While this is welcome, it’s also long overdue given the central bank’s previous announcements that inflation could peak at 11% later this year. The central bank clearly needs to do something, they have been tentative and weak all year, watching the currency decline while being wishy washy about whether they have the means to combat some of the threats being posed by the current surge in prices.

Asian stock markets have advanced, extending a global rally as strong results from US companies and the expected resumption off Russian gas supply to Europe boosted confidence and eased recession fears, while the dollar is at two-week lows.

The gains were led by Japan’s Nikkei, up 2.5%, while Hong Kong’s Hang Seng rose 1.3% and the Australian market gained 1.6%. Europe’s exchanges are also expected to open higher.

The Agenda

  • 1.30pm BST: Canada inflation for June (forecast: 8.4%)
  • 3pm BST: Eurozone consumer confidence for July
  • 3pm BST: US Existing home sales for June


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